20 August 2025: Stamp duty and Council tax may be done away with

In the Autumn Budget, Rachel Reeves is planning the largest shake-up of property taxes in decades.

It would mean the end of stamp duty and, eventually, council tax, as the Government intends to replace the £12 billion that stamp duty raises and create what it considers a more equitable system to fund local services.

The most important change in the payment of stamp duty is that, instead of the buyer paying, it will become a tax paid by the seller of all properties valued at over £500,000.

Stamp duty has long been criticised as a “transaction tax” that distorts the housing market, with critics arguing that it discourages people from moving, penalises first-time buyers and reduces mobility for older owners who want to downsize.

Unlike the current system, which covers about 60 percent of transactions, the new tax would touch only around 20 percent. Rates would be set nationally and collected by HMRC.

Income from stamp duty fluctuates depending on the housing market. By contrast, officials are said to believe a proportional property tax could provide a more stable income stream while narrowing the scope to higher-value sales.

Alongside replacing stamp duty, ministers are also said to be considering proposals to scrap council tax altogether.

Introduced in 1993, council tax is still based on 1991 property values and has been described by the Institute for Fiscal Studies as “flawed and out of date”.

Tim Leunig, who has been an advisor to two Chancellors, wrote a 2023 report for the think tank Onward, suggesting abolishing council tax and replacing it with an annual property levy linked directly to house value. This is now being seriously considered.

Under his model, households would pay 0.44 percent on the value of their home between £80,000 and £500,000, capped at £2,196 a year, plus 0.54 percent on the portion above £500,000.

For example, a family in a £650,000 property would pay the maximum £2,196 to their local authority, plus another £810 to the Treasury – a total of £3,006 a year.

Homes worth more than £1m would face an additional 0.81 percent charge on the value above that threshold.

Unlike stamp duty, this would be an annual charge, meaning the impact would be felt year after year rather than at the point of purchase. To soften the blow, Leunig proposed the system would not apply retrospectively: only those buying after its introduction would be liable.

The Government faces intense fiscal pressure due to higher-than-expected borrowing, weak growth, and the cost of its U-turn on welfare cuts.

The Chancellor is now faced with finding additional revenue to plug these gaps in the public finances without breaking her promise not to raise income tax, national insurance and VAT.

There is no clear consensus on how much she will need to raise at the next Budget, with figures ranging from £10bn to over £40bn.

By focusing on property wealth, a proportional tax could raise revenue from higher-value homes without hitting wages. The Treasury has likely authorised the leak of the Chancellor's plans in order to gauge public opinion.

If they decide to go ahead, a national property tax could be legislated for within this parliament. However, due to its complexity, the replacement of council tax is likely to be deferred to a second Labour term, which, as things stand, is looking increasingly unlikely.

The publication of data that is used by both the Bank of England and the financial market to weigh up the economy has been delayed by up to two weeks due to concerns about the quality of the data.

The Office for National Statistics said yesterday that the release of the monthly retail sales figures has been rescheduled to allow it to complete a “quality assurance check”.

The pound continued to lose ground yesterday as the dollar continues to benefit from the emerging clarity around Donald Trump’s trade policies. It fell to a low of 1.3477 and closed at 1.3492.

There was a major summit which involved the Heads of Government from the U.S., the EU, and Ukraine held earlier this week, but to gauge the reaction of the financial market, it may as well not have happened at all.

It could be that traders are waiting for positive news regarding a ceasefire in Russia’s invasion of Ukraine or, more likely, are confused by the comings and goings involving Trump, Putin and Zelenskyy over the past week.

By and large, such a major meeting would see some significant movement in the currency market, but so far, apart from a little weakness seen by the Euro, the markets have appeared ambivalent.

Traders and Investors who “put their money where their mouths are, usually gauge an opportunity better than politicians, so the lack of movement in the markets suggests that there has been little progress and Trump, who said before taking office that he could end the war on “day one, or sooner”, will have to wait even longer for his predicted (by him) diplomatic triumph.

It seems that European involvement in any peace deal will cost the region a significant sum of money, hence the current weakness of the common currency. Meanwhile, Sir Keir Starmer, far from being sidelined by Brexit, has taken up a sensible position in the negotiations while not committing any further public funds to any involvement in policing any end to hostilities.

Speaking over the weekend, Fed Governor Michelle Bowman went further in committing to her 180-degree U-turn in her voting intentions at the FOMC. Having voted against a cut earlier in the year, she now believes that there should be three cuts at the next three meetings. She told Bloomberg that she sees a risk that further delays in cutting rates could "result in a deterioration in labour market conditions and a further slowing in economic growth."

Bowman has lost a large part of her credibility since her reappointment as a Governor was in large part influenced by none other than Donald Trump. Furthermore, another voice for immediate rate cuts belongs to Christopher Waller, who, from nowhere has suddenly become a leading candidate to replace Jerome Powell as Fed Chair.

The market remains in a “summer state” with another ten days to go before Labor Day and the traditional end of Summer.

The dollar index is slowly recovering its poise, although it remains subject to the President’s “foibles”.

Yesterday it rallied to a high of 98.32 and closed at 98.28.

While the ECB has seemingly ended, for now, its cycle of interest rate cuts, it has continued to shrink its balance sheet, which is another method of loosening monetary policy. Bonds that it had purchased over several years to bolster the Eurozone economy are now being allowed to mature and not replaced in its still substantial portfolio.

This adds liquidity to the market and lowers long-term interest rates.

There has been little done to mark the retirement of one of the Governing Council’s longest-serving members and by far its largest hawk. It could be said that by questioning every rate cut and calling for the fight against inflation to be driven forward aggressively, Robert Holzmann, the now retired Governor of the Austrian National Bank, was the prime architect of the current position in which inflation appears to have been defeated, allowing the ECB to begin concentrating on economic growth.

The Question remains, who will replace Holzmann as “Chief Hawk”? Many people’s choice will be the German Economist and member of both the Governing Council and the Bank’s Executive Board. However, even she has tempered her calls for rates to be held, favouring a more pragmatic approach.

While Germany still wallows in its mostly self-inflicted economic mess, the eurozone’s next largest economy, France, has begun to recover from its political issues and has begun to see economic growth again. However, France being France, issues are seldom far from the surface.

Emmanuel Macron’s wish to do away with two public holidays to improve output and productivity is being met with typical hostility, while the further raising of the retirement age is being threatened by a national strike. However, for now, the Government can be satisfied with an economy that beat expectations in Q2, growing by 0.3% and also showed an improvement over its Q1 GDP growth of 0.1%. France is facing relatively sluggish economic growth and pressures from its high deficit.

Prime Minister François Bayrou wants to reduce the budget deficit from 5.4% of GDP this year to 4.6% in 2026, ultimately targeting the EU's 3% fiscal deficit limit by 2029.

The Euro likely would be trading at a far lower level if the market were at “full strength”. Since the majority of trades are being driven by commercial interests, with traders and investors currently sidelined or still on holiday, the single currency is holding up well as the fog of uncertainty begins to clear.

Yesterday, the Euro fell to a low of 1.1639 and closed at 1.1649.

Have a great day!